Oil and gas well services contractors report “steady but slowing demand” in 2014 but forecast sizeable dips in demand in 2015, a new industry report suggests.

The 2015 Oil & Gas UK Well Services Contractors Report, which looks back at how companies fared in 2014, represents “around 85 per cent of well services contractors” and is published by industry body Oil & Gas UK.

The survey is taken from seven Oil & Gas UK member firms, compared with 10 who answered the 2013 report.

Well services companies, which support the UK offshore oil and gas industry throughout the life cycle of well operations, reported gross revenue of $3.24 billion (£1.97 billion) for the 2014 year, which the report states was up one per cent on 2013.

However those firms expect well drilling in the UK Continental Shelf will “fall significantly” in 2015 .

Earnings before interest and other costs rose “nearly 23 per cent to $591 million (£386.8 million) in 2014”, the report states, and ahead of forecast as a result of “strong performance” in the first three quarters of 2014.

However, well services contractors are forecasting revenues will dip “nearly 23 per cent in 2015 to $2.5 billion (£1.64 billion), reflecting the predicted downturn in drilling activity resulting from the reduction in oil price”.

“Furthermore, the Well Services Contractor Forum members recognise that the actual revenue in 2015 could be even lower,” the report adds.

Earnings are also forecast to fall by around 23 per cent to $456 million (£298.4 million) in 2015.

According to the report, the number of wells drilled in the UK Continental Shelf has “decreased by 17.7 per cent since 2010, though revenues remained “consistently strong”.

Capital investment by well services contractors dipped 30 per cent last year to $148.7 million (£97.3 million), the lowest capital investment figure since 2010, and investment is predicted will fall a “further 25 per cent to $110.8 million (£72.5 million) in 2015.

The UK well services contractor sector employed 12,894 people in 2014, which was down 16 per cent on the 2013 figure of 15,339.

“In 2014, the number of graduate engineers (326), technicians (1,189) and apprentices (89) employed within the sector declined by 75 per cent, 36 per cent and 64 per cent, respectively,” the report states, though the figures are skewed “due to different companies submitting information to this year’s survey”.

A like-for-like comparison shows the number of graduate engineers decreased by 44 per cent, technicians by three per cent and apprentices by 47 per cent.

Staff numbers are predicted to fall further in 2015 as “all respondents” to the survey reported a dip in demand for services, notably in Q4 of 2014.

This has come from a reported £14.4 billion investment in the UK oil and gas sector in 2013, which has carried “strong demand for services” into the 2014 year.

The report suggests gross revenue generated by the sector in 2014, “had yet to feel the impact of the oil price fall that began in the last quarter of 2014.”

The report states: “Towards the end of 2014 and into the first quarter of 2015, a number of companies saw a reduction in the demand for their services and the expectation for 2015 is that activity levels will continue to decline.

“The report confirms that the sector, along with the rest of the UK oil and gas industry, faces a challenging business environment and therefore recruited fewer new staff during 2014.”

Oonagh Werngren, Oil & Gas UK’s operations director, said: “Throughout the first half of 2014, it was clear that well services contractors continued to benefit from the high level of investment in the UK continental shelf (UKCS) which occurred in 2013.

“In the latter half of 2014, however, a number of companies reported a slow-down in the demand for their services and expect this trend to continue in 2015, with respondents predicting that the oil price fall will have a negative impact on drilling activity.”